“The Italian government is conscious that it has chosen a budget policy approach which is not in line” with EU rules, Economy Minister Giovanni Tria wrote. “It was a tough but necessary decision in light of the persistent delay in recuperating the pre-crisis GDP levels.”

The Italian government’s decision is part of its aim to deliver on campaign promises made by the coalition partners, the populist 5 Star Movement and League parties. These include slashing taxes and increasing welfare spending to help the poor and unemployed. The measures are widely popular in Italy….

The European Commission on Tuesday will discuss the Italian budget at a meeting of commissioners…. the first formal step of a procedure that could end in the rejection of Italy’s budget plan and imposition of fines on the country.

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One hundred basis points of the spread between Italian ten-year government bond yields compared to their German equivalents is linked to the misplaced fear Italy could leave the euro, Deputy Prime Minister Luigi Di Maio said on Monday.

“People say this is a government that want to leave the euro, but it is not the case,” he said.